PENNSYLVANIA, USA — Three of the major credit reporting agencies have decided to remove most medical debt from credit reports.
"This might add 100 points to somebody's credit score," Ted Rossman, a senior industry analyst with Bankrate.com said.
Starting in July, millions of Americans could see some changes to their credit report. That's when Equifax, Experian, and TransUnion will remove most medical debt from their reporting process.
TransUnion said in a statement that this change will remove nearly 70% of medical collection debt.
The Consumer Financial Protection Bureau says 43 million Americans owe $88 billion in medical debt with an average debt being under $500.
"Maybe it was literally a one time life and death crisis, it's apples to oranges with respect to other credit obligations, which is part of why they're making that shift," Rossman said. "I don't think medical debt is as predictive of your risk as a borrower or something else, like paying your car loan on time or your mortgage. Something like that."
Right now, even paid bills that went to collections can stay on your credit report for to up seven years. Come this summer, those bills that have been paid will be removed. Also, any unpaid collections that have been open for less than a year will come off too.
Then in 2023, any medical payments under $500 will disappear from your report.
Some in the health care industry fear this will impact smaller doctor's offices if people think these bills no longer matter, but that's not the case.
"This is changing how it appears on your credit report, it doesn't make the debt go away, unfortunately," Rossman said. "So, you have to pay it back."
Medical debt that is more than $500 and has been in collections for more than a year, will still impact your credit.
Something to keep in mind, if you start to pay off medical debt by using a credit card, that becomes credit card debt, not medical debt. That will hurt your score if you don't pay.
If you haven't lately, you should check your credit report at least once a year.
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